RBA Warns of Rate Hikes as Real Wages Fall

Australian real wages fell by 0.6% over the past year as a 3.8% inflation rate outpaced nominal wage growth of 3.2%, according to data from the Australian Bureau of Statistics. While nominal wages rose 0.8% in the June quarter, the annual decline left workers effectively worse off. Jim Chalmers, the Treasurer of Australia, noted that nominal wages have grown above 3% for four consecutive years under the Labor government, though he conceded that high inflation and conflict in the Middle East have pressured real earnings.

Reserve Bank of Australia Deputy Governor Andrew Hauser warned that the central bank will raise interest rates again if upside risks to inflation crystallize. Speaking in Brisbane, Hauser identified the Middle East conflict, the global AI boom—specifically rising costs for tech components—and weak domestic productivity as primary risks. He clarified that while the economy is growing slower than in the past, it is not in a slump or depression.

The RBA currently maintains the cash rate at 4.35% following three hikes in 2026. While some economists suggest the current moderation in wage growth may reduce the likelihood of a September hike, others expect growth to accelerate in the September quarter. This anticipation follows a Fair Work Commission decision in May to implement a 4.75% increase in award wages that took effect in July.